India's growth cycle is likely to improve despite global uncertainty: Report

New Delhi: India's economic growth is on the path to recovery, supported by multiple positive factors, even as global trade uncertainty continues to affect private investments, according to a recent report by HSBC Mutual Fund.

The report suggested that the growth cycle in India is likely to be bottoming out. Several domestic indicators are showing signs of improvement, including falling crude oil prices, expectations of a normal monsoon, and a more accommodative interest rate and liquidity environment.

It said, "We believe growth cycle in India may be bottoming out. Interest rate and liquidity cycle, decline in crude prices and normal monsoon are all supportive of a pick-up in growth going forward".

These developments are expected to boost economic activity in the coming quarters.

India's GDP growth improved to 6.2 per cent year-on-year in the third quarter of FY25, indicating resilience in the economy.

HSBC MF believed that the government has taken steps to support growth, including income tax rate cuts announced in the Union Budget to boost private consumption, which had shown signs of slowing.

The report also highlighted that while global trade tensions remain a concern and could delay a full recovery in private capital expenditure in the short term, India's medium-term investment outlook remains positive.

This optimism is based on a combination of strong government spending on infrastructure and manufacturing, a recovery in the real estate sector, and a gradual revival in private investments.

Key areas likely to attract higher private investment include renewable energy, its related supply chains, and the localization of high-end technology manufacturing.

India's growing role in global supply chains is also seen as a driver for faster economic growth in the years ahead.

The Reserve Bank of India (RBI) is also expected to play a key role in supporting the recovery. With the U.S. dollar weakening and crude prices declining, there is more space for the RBI to ease policy rates.

Most economists now expect the central bank to cut rates by another 50 basis points during the year. This could further boost liquidity and economic sentiment.

Meanwhile, stock market valuations have corrected recently. Nifty valuations are now in line with their 5- and 10-year averages, making Indian equities relatively more attractive.

The report also remained positive on the outlook for Indian stocks, supported by the country's improving medium-term growth prospects.

An above-normal monsoon, as forecasted, is also likely to lift rural demand and further support the economic recovery.